Surprisingly, to some, the economic news continues to show a marked lack of vitality.

In particular, wholesale inventories showed an actual decline, with the prior figure being revised sharply downwards as well. This does not bode well for 4Q GDP.

I have included the particulars in the evening stock markets report.

There are jobs to be had, if you like part time work with few benefits at a poverty level wage.  Granted the fortunate few are doing very well. As it has been for quite some time.

The paper asset markets in bonds and stocks are edgy as they think that the Fed will raise next week, without regard to what is happening domestically and in the rest of the world, unless an unavoidable meltdown starts to manifest overseas that cannot be ignored.

At this point, the Fed is so ensnared in the credibility trap that they cannot readily acknowledge the results of their serial policy errors.  QE is an unmitigated fiasco, if not a tragic misappropriation of badly need balance sheet flexibility which will be sorely missed in the future.

They must seemingly push on, and raise rates to provide policy room for the cuts that will likely come when their latest paper asset bubble collapses.  Meanwhile, the financiers and thought leaders ignore this, burying their heads in the sands of detailed diversions.

But, alas, the belief in The Recovery is flagging among the broader public and those who have a mind to think independently as the economic statistics continue to show it to be wishful thinking. People can only suspend belief in what they see with their own eyes for so long, unless of course their perks and paychecks depend on it.

Speaking of ignoring things, the odd reaction by some pundits to the very odd happenings in the gold market is similarly puzzling.

I have recently read some fairly convoluted attempts to explain away the historic decline in ‘registered gold’ on the Comex an indicator of a willingness to sell, even while open interest, an indicator of investor interest in the metal, remains relatively steady. This has not happened before even since the turn of the century.

As a reminder, ‘eligible’ gold is that which has been accepted by a licensed facility as being in a form and purity in accordance with the Nymex rules.  That is all that it means. Someone owns it and is storing it in a licensed facility.

But ‘registered’ means that a warrant is attached to that gold, which is a prerequisite for a publicly disclosed sale on the exchange, that is, one in which the terms of the sale are disclosed. The warrant is held in the name of a dealer, and not in the name of the customer. This is to facilitate its transfer in a delivery. I tend to think of it as roughly analogous to a broker holding one’s stock in ‘street name.’

I think that the gold that remains in the licensed facilities in New York is held for the most part in strong hands, who do not have an intention of selling it at these prices. For the most part they are large funds and wealthy individuals who wish to store it there in a format for easier sale in the future. And of course some is held there by the bullion banks dealers in their ‘house accounts.’

The apologists like to point to the all the gold, including the eligible saying, ‘see there is plenty of gold, and we are well-supplied.’ Except of course that the gold does not belong to the exchange or anyone except for the owner, and is not in any way indicated that it is for sale, even to the extent of having a simple warrant for sale attached to it that is easy to obtain and costs almost nothing.

In their convoluted excuses, don’t they think that this makes some holders of bullion reluctant to store their own bullion there? If my bank started counting the contents of my safe deposit box as part of their total disposable assets, I might take that the wrong way. This is the essence of what Kyle Bass said with regard to his ‘fiduciary duty.’  Thanks for the assurances, and now give me the gold.

I am not suggesting that there will be a ‘default’ in New York, because it has already become a nearly virtual trading place for synthetic gold claims, rather than bullion.  And the rules on what one might obtain in a crunch are remarkably kind to those who have the greatest influence, and largest teams of lawyers.

But increasingly it is starting to look like a game of musical chairs, of borrowing from Peter to pay Paul.

And even though the warrants do not expire, and do not compel one to ‘sell’ I can see why someone would not wish their own gold to be held in some other financial organization’s name, no matter how ‘convenient’ that might seem. 

I would not wish to have any of my own bullion commingled in any way should a market dislocation occur. The precedent that was set with MF Global in wish owners holding valid warehouse receipts were dispossessed and force settled by the courts was chilling.

I notice that JPM has been accumulating gold again for its house account, and I suspect they will perform the role of key ‘stopper’ should there be any large amounts standing for delivery as this active month of December unwinds. They did step in and supply the big demand in the last active month which we had.

Have a pleasant evening.